The three categories at a glance
| Category | Confidence | Typical drill spacing | Usable in | Converts to |
|---|---|---|---|---|
| Inferred | Lowest | 50–100m grid+ | PEA only (with disclaimer) | No reserve eligibility |
| Indicated | Moderate | 25–50m grid | PEA, PFS, DFS | Probable Reserves |
| Measured | Highest | Under 25m grid | PEA, PFS, DFS | Proven Reserves |
Drill spacings shown are typical ranges, not regulatory minima. The Qualified Person determines what spacing is appropriate given deposit style. Narrow, high-grade vein deposits often require tighter spacing for any given category than bulk disseminated systems.
Why drill spacing is the dividing line
Mineral deposits are not uniform. Grade varies across metres or even centimetres. The only way to know what is between two drill holes is to drill more holes — or estimate. Resource categorisation is essentially a confidence statement about how much estimation versus measurement underlies any given block of the deposit model.
Picture a 1km × 1km mineralised zone:
- Drill it on a 100m × 100m grid and you have 100 holes. The geometry of the deposit is roughly understood. Between any two holes, grade is extrapolated. That is Inferred.
- Drill it on a 50m × 50m grid and you have 400 holes. Continuity between holes is now reasonable to assume. Mine planning can begin at a preliminary level. That is Indicated.
- Drill it on a 25m × 25m grid and you have 1,600 holes. Grade is well-constrained at the block-model scale. Detailed mine planning is supportable. That is Measured.
The economics are obvious: a 25m grid costs 16x more in drilling than a 100m grid. Junior miners can rarely afford to drill an entire deposit to Measured spacing, so resource estimates typically combine all three categories, with the higher-confidence categories concentrated in the parts of the deposit drilled most densely (usually near the centre of the envelope or at depths planned for early mining).
This is also why infill drilling — drilling additional holes between existing ones — is one of the main catalysts for junior miners between major discoveries. A successful infill programme can upgrade Inferred ounces to Indicated, which makes them eligible for inclusion in a PFS or DFS economic study.
The conversion ladder
Resource categorisation feeds directly into the reserve categorisation that anchors every mining feasibility study. Under NI 43-101 (which adopts the CIM Definition Standards), the conversion ladder is strict and one-directional:
Inferred Resource ──── (infill drilling) ────► Indicated
│
│ (economic study)
▼
Probable Reserve
Measured Resource ──── (economic study) ────► Proven ReserveThree rules to internalise:
- Inferred cannot skip directly to Reserve. It must first be upgraded to Indicated (or Measured) through more drilling. Then an economic study can convert it.
- Conversion to Reserve is not automatic. Even Measured Resources may fail to convert if the economic study (using realistic metal prices, costs, and recoveries) shows the material is not profitable to mine.
- Reserves can shrink. Reserves are calculated at a specific metal price. If prices fall, previously-profitable rock can fall below the cut-off and reclassify back to Resource. This is why reserves get "restated" periodically.
Inferred ounces don't always survive
The single most important practical fact about Inferred Resources is that they do not have a 1:1 conversion rate to Indicated. When a junior infill-drills an Inferred area, three things can happen:
Clean upgrade
Infill drilling confirms grade and continuity. Ounces transfer cleanly from Inferred to Indicated. Resource grows or stays flat.
Partial upgrade
Some areas confirm, others come in below modeled grade. Net result is fewer ounces in Indicated than were in Inferred. The most common outcome.
Failed conversion
Infill reveals discontinuity, lower grades, or geometric issues. Material fails the Indicated bar and stays Inferred — or is removed entirely.
Specific conversion rates vary enormously by deposit type. Bulk-tonnage porphyry systems with consistent grades convert well. Narrow-vein gold deposits with high grade variability often convert poorly. Junior managements rarely highlight conversion losses in press releases, so it falls to the investor to track them across consecutive resource updates.
How to spot conversion problems
Compare two resource updates for the same project:
- Did total tonnes grow in line with new drilling, or shrink?
- Did average grade hold up, or fall meaningfully?
- What proportion of the previously-Inferred resource is now Indicated? Below 60% conversion is a yellow flag; below 40% is a red flag worth investigating.
Why PEAs can use Inferred but PFS and DFS cannot
This rule trips up a lot of new investors. The logic is proportional to how the studies are used:
- A Preliminary Economic Assessment (PEA) is a scoping study with ±30% accuracy. It is meant to answer "is this project worth taking further?" — not "is this project bankable?" Inferred Resources are allowed because the whole exercise is preliminary.
- A Pre-Feasibility Study (PFS) is meant to be the basis for declaring reserves and beginning financing discussions. The economic case must rest on resources whose geometry and grade are reasonably established. Inferred Resources don't clear that bar.
- A Definitive Feasibility Study (DFS) is bankable. Construction lenders rely on it. Including Inferred Resources would inject risk that the rock that appears in the financial model may not actually exist.
The required PEA disclaimer captures the spirit of the rule exactly: "The PEA is preliminary in nature, includes Inferred mineral resources that are considered too speculative geologically to have the economic considerations applied that would enable them to be categorised as mineral reserves, and there is no certainty that the preliminary economic assessment will be realised." If a project's entire economic case rests on the PEA, you are betting that future drilling upgrades the Inferred portion — and that is a real bet, not a rounding error.
How to read a category-mixed resource table
Here is a table from a hypothetical gold deposit. The headline press release would probably round this to "a 4 million ounce gold project."
| Category | Tonnes (Mt) | Grade (g/t Au) | Contained Oz | % of Total |
|---|---|---|---|---|
| Measured | 5 | 2.20 | 354,000 | 9% |
| Indicated | 22 | 1.55 | 1,096,000 | 28% |
| M + I | 27 | 1.67 | 1,450,000 | 37% |
| Inferred | 52 | 1.46 | 2,440,000 | 63% |
Three observations a careful reader would make:
- The project is 63% Inferred by ounces. The headline "4 million ounces" is geologically honest, but the M+I number — 1.45 Moz — is what an economic study can actually use today. The other 2.44 Moz is a drilling-budget hypothesis.
- Grade is highest in Measured and falls through Inferred. This is the typical pattern — denser drilling concentrates in the best parts of the deposit first. As infill expands, the average grade often drifts down. Modeling future resource growth at the current Measured grade is wrong; the Inferred grade is the realistic ceiling.
- A PFS on this project could use 1.45 Moz; a PEA could use the full 3.9 Moz. If the company has only published a PEA, the economics reflect a world where the Inferred ounces survive. They might not.
For a complete walkthrough of how this fits into the broader NI 43-101 report — including economic studies, the Qualified Person system, and red flags to watch for — see our pillar guide on How to Read an NI 43-101 Report.
Frequently Asked Questions
What is the difference between Inferred, Indicated, and Measured resources?
The three categories represent increasing geological confidence based on drill spacing. Inferred Resources have the lowest confidence — drill spacing is wide enough that grade and continuity are estimated rather than known. Indicated Resources have moderate confidence — drill spacing supports preliminary mine planning. Measured Resources have the highest confidence — drill spacing is dense enough to support detailed production planning. The exact spacing varies by deposit style, but a rule of thumb is that Inferred uses 50-100m grids, Indicated 25-50m, and Measured under 25m.
Can Inferred Resources be used in a feasibility study?
No. NI 43-101 explicitly prohibits using Inferred Resources in Pre-Feasibility Studies (PFS) or Definitive Feasibility Studies (DFS). Inferred Resources CAN be used in a Preliminary Economic Assessment (PEA), but only with a mandatory disclaimer that 'there is no certainty that the preliminary economic assessment will be realised.' For PFS and DFS, only Indicated and Measured Resources count.
What percentage of Inferred Resources actually convert to Indicated?
Conversion rates vary by deposit type and the quality of the original estimate, but historical industry experience suggests a meaningful fraction of Inferred ounces is lost during conversion — sometimes 20-40% or more. Some Inferred ounces upgrade cleanly, some are reclassified at lower grades, and some disappear entirely when infill drilling reveals the deposit is smaller or less continuous than initially modeled. Treating Inferred as 'almost Indicated' is the single most common retail-investor mistake.
How do resource categories convert to reserves?
Under NI 43-101 and the CIM Definition Standards, Indicated Resources can convert to Probable Reserves, and Measured Resources can convert to Proven Reserves — provided a Pre-Feasibility or Definitive Feasibility Study demonstrates economic viability. Inferred Resources cannot convert to reserves at all without first upgrading to Indicated or Measured through additional drilling. The conversion is also conditional on economics: even Measured Resources at uneconomic grades or in marginal jurisdictions may not convert to reserves.
Why are resource categories grouped 'M+I' but Inferred reported separately?
NI 43-101 and the CIM standards specifically require that Inferred Resources be reported separately from Measured + Indicated. The M+I total represents the resource that could potentially be converted to reserves through economic study. Inferred is the geological hypothesis that has not yet reached that bar. Companies that headline a single 'global resource' number without breaking out the Inferred portion are doing marketing, not compliant disclosure — always check Item 14 of the technical report for the breakdown.
Is a 5 g/t Indicated Resource better than a 5 g/t Inferred Resource?
Yes, materially. The grades may be identical on paper, but the Indicated tonnage is far more likely to actually exist as represented after additional drilling. Indicated Resources can also be used in PFS/DFS and converted to reserves, while Inferred cannot. For investment purposes, a smaller Indicated deposit is often worth more than a larger Inferred one at the same grade — because Indicated has cleared the geological-confidence bar that Inferred has not.
Keep going
Resource categories are one part of a larger system. The full pillar guide covers the 27-item NI 43-101 structure, the 5 sections that matter most, Qualified Persons, the PEA/PFS/DFS hierarchy, and 10 red flags that signal a weak report.
Read: How to Read an NI 43-101 Report →